Baltic Dry Index. 1110
+13 Brent Crude 84.99
Spot Gold 1959 U S 2 Year Yield 4.87 -0.04
“Among
the things he passed on to me were the belief that all men and women,
regardless of their color or religion, are created equal and that individuals
determine their own destiny; that is, it’s largely their own ambition and hard
work that determine their fate in life.”
In the
stock casinos, nervous optimism that the worst of the interest rate hikes are
over. But are the punters now completely misreading the US Fed, the ECB and the
Bank of Japan?
Have
stocks and the central banks suddenly set off in different directions? If they have, who wins?
With much
more food price inflation to come, from rice, wheat, barley, coffee and cocoa,
to name just a few, wage price inflation is probably just starting.
Our
central banksters now find themselves in a corner of their own making.
In the
USA, Chairman Powell is exceptionally challenged. If he lets up on interest
rates now and wage price inflation rips through the US economy, he risks having
to raise interest rates in election year 2024, risking pushing the US economy
into recession in a Presidential election year.
Alternatively,
the Fed could do nothing and let US inflation head back towards double digit
inflation. What to do, what to do?
Chasing overpriced
stocks in a hyped up AI bubble, to this old dinosaur market trader doesn’t seem
wise, to say the least.
S&P 500 closes nearly 1% higher on softening
inflation data, nabs 3rd week of gains: Live updates
UPDATED FRI, JUL 28 2023 4:39 PM EDT
Stocks rose Friday with the Dow Jones Industrial Average and S&P 500 closing
out their third winning weeks in a row as a measure of inflation closely
watched by the Federal Reserve came in at its lowest in nearly two years.
The Dow jumped
176.57 points, or 0.50%, to 35,459.29. The S&P 500 added
0.99% to 4,582.23. The Nasdaq Composite gained
1.90% to 14,316.66.
All three major averages notched
weekly gains with the 30-stock average up by about 0.66%. On Thursday, the Dow
ended a 13-day win streak, a length not seen since 1987. The S&P advanced
1.01%, and the tech-heavy index is up 2.02%.
This week, investors cheered data
showing cooling inflation and stronger-than-expected earnings reports that
supported the case the U.S. could avoid a recession.
On Friday, June
data for the personal consumption expenditures price index continued
to show easing inflation. The gauge showed core PCE gained 0.2%
month-over-month, in line with the 0.2% increase expected by economists polled
by Dow Jones. Core PCE rose 4.1% from the year-ago period, lower than the
anticipated 4.2%.
The data is of particular
interest after the central bank raised
interest rates earlier this week in a widely expected move. The
Fed targets inflation at 2% annually.
“In the wake of stronger than
expected GDP, and a better-than-expected earnings season, this could be the
catalyst to send the market to new highs,” wrote Gina Bolvin, president of
Bolvin Wealth Management Group.
Earnings season continued with
Dow member Procter & Gamble shares gaining
nearly 3%. The consumer goods company behind Tide and other brands
beat analysts’ earnings
and revenue expectations in its most recent quarter.
Intel jumped
6.6% as investors applauded a return
to profitability, while Roku climbed
31% a day after beating Wall Street expectations on both the top and bottom
lines.
On the other hand, Ford Motor shares
fell 3.4% even though the
automaker beat estimates and raised guidance. The company said
its electric vehicle adoption was taking longer than expected due to higher
costs.
Stock market today: Live updates (cnbc.com)
The Bank of Japan just shocked markets with a policy
tweak — here’s why it matters
The Bank
of Japan announced Friday “greater flexibility” in its monetary
policy — surprising global financial markets.
The central bank loosened its yield
curve control — or YCC — in an unexpected move with wide-ranging ramifications.
It sent the yen whipsawing
against the dollar, while Japanese stocks and government bond prices slid.
Elsewhere, the Stoxx 600 in
Europe opened lower and government bond yields in the region jumped.
---- “We
didn’t expect this kind of tweak this time,” Shigeto Nagai, head of Japan
economics at Oxford Economics, told CNBC’s “Capital Connection.”
Why it matters
The Bank of Japan
has been dovish for years, but its move to introduce flexibility into its
until-now strict yield curve control has left economists wondering whether a
more substantial change is on the horizon.
The yield curve
control is a long-term policy that sees the central bank target an interest
rate, and then buy and sell bonds as necessary to achieve that target. It
currently targets a 0% yield on the 10-year government bond with the aim of
stimulating the Japanese economy, which has struggled for many years with
disinflation.
In its policy statement, the BOJ said it will
continue to allow 10-year Japanese government bond yields to fluctuate within
the range of 0.5 percentage point either side of its 0% target — but it will
offer to purchase 10-year JGBs at 1% through fixed-rate operations. This
effectively expands its tolerance by a further 50 basis points.
---- From a market perspective, investors — many
of whom were not expecting this move — were left wondering whether this is a
mere technical adjustment, or the start of a more significant tightening cycle.
Central banks tighten monetary policy when inflation is high, as demonstrated
by the U.S. Federal Reserve’s and European Central Bank’s rate hikes over the
past year.
“Fighting inflation was not the official reason for
the policy tweak, as that would surely imply stronger tightening moves, but the
Bank recognised obstinately elevated inflationary pressure by revising up its
forecast,” Duncan Wrigley, chief China+ economist at Pantheon Macroeconomics,
said in a note.
The BOJ said core consumer inflation, excluding
fresh food, will reach 2.5% in the fiscal year to March, up from a previous
estimate of 1.8%. It added that there are upside risks to the forecast, meaning
inflation could increase more than expected.
---- MUFG said that Friday’s “flexibility” tweak
shows the central bank is not yet ready to end this policy measure.
“Governor Ueda described today’s move as enhancing
the sustainability of monetary easing rather than tightening. It sends a signal
that the BoJ is not yet ready to tighten monetary policy through raising
interest rates,” the bank’s analysts said in a note.
Capital Economics’ economists highlighted the
importance of inflation figures looking ahead. “The longer inflation stays
above target, the larger the chances that the Bank of Japan will have to follow
up today’s tweak to Yield Curve Control with a genuine tightening of monetary
policy,” they wrote.
More
Bank
of Japan loosen's YCC, cites 'greater flexibility' and jolts markets (cnbc.com)
Endgame for Fed's tightening cycle challenged by easing
financial conditions
By Michael
S. Derby July 28,
20237:05 PM GMT+1
July 28
(Reuters) - Less tight financial conditions as exhibited by the red-hot stock
market may increase the chances that the Federal Reserve hikes rates again before
the end of the year, some economists reckon, even as financial markets put
little odds on that happening.
Several
measures of financial conditions, including those mceproduced by the central
bank, have shifted in way that signals reduced restraint on the economy, at a
time when central bank officials believe more work may be needed to lower
inflation.
Taking in to
account everything from stock prices to measures of borrowing costs for the
government, businesses and households, financial conditions matter to monetary
policy. That is because the Fed relies on markets to transmit changes in its
short-term interest rate target to the broader economy.
The current
slackening in these gauges means markets and the Fed are starting to go on
separate paths.
“Easy financial
conditions obviously boost near-term growth,” and can encourage more
risk-taking of the sort that can lean against the restraint the Fed is trying
to impose on the economy, said Benson Durham, head of global policy at Piper
Sandler.
On
Friday, the Federal Reserve reported that its Financial Conditions Impulse on Growth for June
moved to 0.458, from May’s 0.603 reading. The index, now the lowest since
August 2022, seeks to describe whether financial conditions are aiding or
restraining growth, so the latest reading points to them providing less drag on
the economy.
Meanwhile,
Goldman Sachs’ closely watched Financial Conditions Index has been easing
fairly steadily since May. As of the end of July, that measure was also at
levels last seen in late August of last year, while the Chicago Fed’s latest
index has also pointed to easier conditions.
Since
March of last year, the Fed has been engaged in a historically aggressive
campaign of short-term interest rate increases, taking its target rate from
near zero levels to between 5.25% and 5.5% after a
quarter percentage-point increase on Wednesday.
An explicit goal
has been to tighten financial conditions. Mortgage rates have soared to around
7%, while other borrowing costs are up. Rate hikes also slammed the stock
market, at least for a time, while pushing up the dollar relative to other
currencies.
Tighter financial conditions have helped accomplish the Fed’s desire to slow down the economy in a bid to lower inflation pressures from multi-decade highs. But now things are shifting the other way, which could create issues for the Fed as it approaches the endgame for its tightening cycle.
The various gauges on balance show financial conditions reached
their most restrictive levels late last year, and have receded since. That
dovetails with a stock market rally that has pushed up the benchmark S&P
500 Index (.SPX) by nearly 20% so far this year. Meanwhile,
yields on the riskiest corporate debt securities - so-called junk bonds - have
fallen by about 1.2 percentage points since last autumn even as the Fed kept
raising interest rates.
---- Powell
noted in the press conference that it is a tossup as to whether the Fed raises
rates or holds steady in September. He offered no views on whether the central
bank will be able to boost by another quarter percentage point by year’s end,
as June FOMC forecasts predicted.
Piper Sandler's
Durham said the easier financial conditions make the odds of another rate rise
higher by year’s end, in contrast with the current market outlook. This easing
gives officials “the space and the breathing room” to bump rates up again,
especially in an economy that is otherwise doing very well despite aggressive
increases.
Bank of
America economists said in a note on Thursday that they believe market pricings
show an underestimation of what the central bank needs to do on rates. They
said easing inflation in the face of still-strong jobs data and
better-than-expected growth “are likely to keep the Fed worried that its policy
stance is insufficiently restrictive.”
More
Endgame
for Fed's tightening cycle challenged by easing financial conditions | Reuters
Finally, a journey of a thousand miles starts with a single step. Whose great idea was it to weaponise the dollar?
Bolivia is the latest South American nation to use China’s yuan for
trade in challenge to the dollar
Updated
3:24 AM GMT+1, July 28, 2023
LA PAZ, Bolivia (AP) — Bolivia is now using the yuan to pay for imports
and exports, becoming the latest country in South America to regularly use the
Chinese currency in a small but growing challenge to the hegemony of the U.S.
dollar for international financial transactions in the region.
Between May and July of this year, Bolivia
conducted financial operations amounting to 278 million Chinese yuan ($38.7
million), which accounts for 10% of its foreign trade during that period,
Economy Minister Marcelo Montenegro said on Thursday.
“We’re already using the yuan. It’s a reality and a
good start,” Montenegro said during a news conference. “Banana, zinc, and wood
manufacturing exporters are conducting transactions in yuan, as well as
importers of vehicles and capital goods.” These electronic transactions are
carried out through the state-owned Banco Unión.
“The amount being used in yuan is
still relatively small, but it will increase over time,” Montenegro said.
With these transactions, Bolivia joins other
countries in South America, most notably Brazil and Argentina, which are using
the yuan. The three countries are ruled by leftist or left-leaning governments.
In Latin America and the Caribbean, the use of the
yuan is growing especially “in those countries that are looking to establish
stronger ties with China, that view themselves as in some way politically
aligned on this particular objective on decreasing their overall reliance on
the dollar and on the U.S. in general,” said Margaret Myers, director of the
Asia & Latin America Program at the Washington-based Inter-American
Dialogue.
The use of the yuan comes at a time when China’s
footprint in the region is increasing with rising trade and investment.
More
Global Inflation/Stagflation/Recession Watch.
Given
our Magic Money Tree central banksters and our spendthrift politicians, inflation now needs an entire section of its
own.
Key Fed inflation rate falls to lowest annual rate in
nearly 2 years
PUBLISHED FRI, JUL 28 2023 8:39
AM EDT
Inflation showed further signs of cooling in June, according to a gauge
released Friday that the Federal Reserve follows closely.
The personal consumption expenditures price index excluding food and
energy increased just 0.2% from the previous month, in line with the Dow Jones
estimate, the Commerce Department said.
So-called core PCE rose 4.1% from a year ago, compared to the estimate
for 4.2%. The annual rate was the lowest since September 2021.
PCE inflation June
2023: (cnbc.com)
US economy unexpectedly accelerated to a 2.4% growth rate in April-June
quarter despite Fed hikes
Updated 9:47 PM GMT+1, July 27, 2023
WASHINGTON (AP) — The U.S. economy surprisingly accelerated to a 2.4%
annual growth rate from April through June, showing continued resilience in the
face of steadily higher interest rates resulting from the Federal Reserve’s
16-month-long fight to bring down inflation.
Thursday’s estimate from the Commerce Department
indicated that the gross domestic product — the economy’s total output of goods
and services — picked up from the 2% growth rate in the January-March quarter.
Last quarter’s expansion was well above the 1.5% annual rate that economists
had forecast.
Driving last quarter’s growth was a burst of
business investment. Excluding housing, business spending surged at a 7.7%
annual rate, the fastest such pace since early 2022. Companies plowed more
money into factories and equipment. Increased spending by state and local
governments also helped fuel the economy’s expansion in the April-June quarter.
Consumer spending, the heart of the nation’s
economy, was also solid last quarter, though it slowed to a 1.6% annual rate
from a robust 4.2% pace in the first quarter of the year.
Investment in housing, though, fell, weakened by
the weight of higher mortgage rates.
“This is a
strong report, confirming that this economy continues to largely shrug off the
Fed’s aggressive rate increases and tightening credit conditions,’’ said Olu
Sonola, head of U.S. economics at Fitch Ratings. “The bottom line is that the
U.S. economy is still growing above trend, and the Fed will be wondering if
they need to do more to slow this economy.”
In fighting inflation, which last year hit a
four-decade high, the Fed has raised its benchmark rate 11 times since March 2022, most recently on Wednesday. The resulting higher costs for a broad range of loans —
from mortgages and credit cards to auto loans and business borrowing — have
taken a toll on growth.
Still, they have yet to tip the
United States into a widely forecast recession. Optimism has been growing that
a recession isn’t coming after all, that the Fed can engineer a so-called
“soft-landing” — slowing the economy enough to bring inflation down to its 2%
annual target without wrecking an expansion of surprising durability.
This week, the International
Monetary Fund upgraded its forecast for U.S. economic growth for all
of 2023 to 1.8%. Though that would be down from 2.1% growth for 2022, it marked
an increase from the 1.6% growth that the IMF had predicted for 2023 back in
April.
More
German economy stagnates in Q2
July
28, 2023
BERLIN (Reuters) - The German economy stagnated in
the second quarter of 2023, with no quarter-on-quarter change in gross domestic
product in seasonally adjusted terms, the federal statistics office reported on
Friday.
A Reuters poll of analysts had forecast a slight
increase of 0.1%, after the economy fell into a mild recession in winter.
Household consumption stabilised in the second
quarter after the weak winter half-year, according to the statistics office.
Year-on-year, the economy contracted by a price and
calendar adjusted 0.2%.
German economy stagnates in Q2 (msn.com)
BASF cuts investment budget amid downturn
July 28, 2023
FRANKFURT (Reuters) - German chemicals giant BASF
on Friday cut its budget for investment in plants and equipment this year to
preserve cash amid a global downturn in the business cycle.
"We have to exercise strict discipline,"
when it comes to investments and reducing inventory levels of raw materials,
Chief Financial Officer (CFO) Dirk Elvermann said in a media call after the
release of detailed second-quarter results.
Investments this year would be cut to 5.7 billion
euros ($6.24 billion), down from 6.3 billion projected earlier this year.
Among other measures, some spending on one of the
company's main projects, the construction of a chemical complex in Zhanjiang,
southern China, would be postponed and better financial terms were also
renegotiated with local contractors, the CFO added.
The company, however, confirmed the larger plans
for the site and the 10 billion euros earmarked for it overall.
BASF on Friday also said that the decline in
second-quarter earnings was a result of lower prices and lower volume across
its businesses but added that its agriculture division was able to increase
prices.
Earlier this month, it reported a drop in quarterly
earnings in an unscheduled release and cut its full-year profit guidance, the
latest in a string of chemical companies caught out by weak demand from
industrial clients and higher interest rates.
A slew of chemical industry peers including Croda,
Lanxess, Victrex, Clariant and Evonik have recently cut their earnings
predictions.
More
BASF cuts investment budget amid downturn (msn.com)
Below,
why a “green energy” economy may not be possible, and if it is, it won’t be
quick and it will be very inflationary, setting off a new long-term commodity
Supercycle. Probably the largest seen so far.
The
“New Energy Economy”: An Exercise in Magical Thinking
https://media4.manhattan-institute.org/sites/default/files/R-0319-MM.pdf
Mines,
Minerals, and "Green" Energy: A Reality Check
https://www.manhattan-institute.org/mines-minerals-and-green-energy-reality-check
"An
Environmental Disaster": An EV Battery Metals Crunch Is On The Horizon As
The Industry Races To Recycle
by Tyler Durden Monday, Aug 02, 2021 - 08:40 PM
Covid-19
Corner
This
section will continue until it becomes unneeded.
COVID-19 hospitalizations and cases rise in possible
summer wave
Thu, July 27, 2023 at 3:00 PM GMT+1
New numbers from the Centers for
Disease Control and Prevention (CDC) shows that weekly COVID-19 hospitalizations
have jumped by over 10 percent across the United States. At least 7,109 admissions
were reported for the week of July 15, up from 6,444 during the previous week.
This is the largest increase of a key indicator of the virus since December 2022.
A second hospital metric is also
trending upwards with summer’s temperatures. An average of 0.73 percent
of emergency room visits in the past week were related to COVID-19 as of
July 21, a jump from 0.49 percent through the same period in June.
"US COVID-19 rates are still
near historic lows after 7 months of steady declines. Early indicators of
COVID-19 activity (emergency department visits, test positivity and wastewater
levels) preceded an increase in hospitalizations seen this past week," CDC
spokesperson Kathleen Conley said in a statement according to
CBS News. "The U.S. has
experienced increases in COVID-19 during the past three summers, so it's not
surprising to see an uptick.”
Hospitalizations do remain below
the levels recorded at this time last year as of now. July 2022 peaked at over 44,000 weekly
hospitalizations and five
percent of emergency room visits in last year’s summer surge.
While this current uptick is
small, it is a notable reversal after months of declining coronavirus numbers
across the country.
In the Los Angeles area, cases increased by about 32 percent this week. Health
officials suspect that this jump may be linked to celebrations from the Fourth
of July, travel, and the region’s record breaking heat causing people to stay inside more frequently.
Upticks in COVID-19 in wastewater samples from
New York also showed a
possible increase in cases in June.
The Midwestern region of the country is the only part of the US that did
not record more hospitalizations last week than the one before.
This rise in cases is not unique
to the United States. Japan may have entered a ninth COVID-19
wave that continues to surge
this month. Hospitalizations and emergency room visits in the Asian country
have risen for nine straight weeks.
More
COVID-19 hospitalizations and cases rise in possible
summer wave (yahoo.com)
Technology Update.
With events happening fast in the
development of solar power and graphene, I’ve added this section.
NASA's
Solid-State Battery Breakthrough Could Transform Air Travel
NASA may have just found a way to change the future of the
aeronautics industry.
Researchers at NASA’s Solid-state Architecture Batteries
for Enhanced Rechargeability and Safety (SABERS) have successfully created
a solid-state battery technically
advanced enough to efficiently power an aircraft. Finding a way to make air
travel greener has been a critical point of interest for the global path to
decarbonization, as well as for the economic wellbeing of the industry in a
future where fuel prices will likely continue to increase while policy
instruments such as carbon taxes become more commonplace.
The transportation sector is one of the world’s biggest
contributors to climate change, producing almost a quarter of total
energy-related carbon emissions worldwide – and air travel is one of the
biggest offenders. On average, airplanes emit approximately 100 times more carbon dioxide per hour than a
shared bus or train ride. Altogether, aviation’s annual emissions are higher
than most entire countries, at 1 billion tons of carbon dioxide per year. And
the combustion of jet fuel doesn’t just emit carbon, it also produces “nitrogen
oxides, soot, water vapor and sulfate aerosols, all of which interact with the
atmosphere and have an effect on the climate in different ways and at different
time scales.”
Not only will the new batteries be able to electrify
aircraft, thereby eliminating carbon and non-carbon emissions associated with
burning jet fuel, these breakthrough solid-state batteries manage to avoid one
of the most major trade-offs plaguing electrification processes writ large:
lithium. Lithium is a finite resource associated with its own slew of negative environmental
externalities, as well as major geopolitical implications. China
currently controls nearly one-third of
the world’s lithium supply chains, and diversifying that market will
not be easy. Furthermore, lithium’s essential role in a huge number
of clean energy infrastructural components has led to rising prices and a
scarcity mindset. Avoiding this sticky situation altogether is a major win for
SABERS.
NASA may have just found a way to change the future of the
aeronautics industry. Researchers at NASA’s Solid-state Architecture Batteries
for Enhanced Rechargeability and Safety (SABERS) have successfully created
a solid-state battery technically
advanced enough to efficiently power an aircraft. Finding a way to make air travel
greener has been a critical point of interest for the global path to
decarbonization, as well as for the economic wellbeing of the industry in a
future where fuel prices will likely continue to increase while policy
instruments such as carbon taxes become more commonplace.
The transportation sector is one of the world’s biggest
contributors to climate change, producing almost a quarter of total
energy-related carbon emissions worldwide – and air travel is one of the
biggest offenders. On average, airplanes emit approximately 100 times more carbon dioxide per hour than a
shared bus or train ride. Altogether, aviation’s annual emissions are higher
than most entire countries, at 1 billion tons of carbon dioxide per year. And
the combustion of jet fuel doesn’t just emit carbon, it also produces “nitrogen
oxides, soot, water vapor and sulfate aerosols, all of which interact with the
atmosphere and have an effect on the climate in different ways and at different
time scales.”
Not only will the new batteries be able to electrify
aircraft, thereby eliminating carbon and non-carbon emissions associated with
burning jet fuel, these breakthrough solid-state batteries manage to avoid one
of the most major trade-offs plaguing electrification processes writ large:
lithium. Lithium is a finite resource associated with its own slew of negative environmental
externalities, as well as major geopolitical implications. China
currently controls nearly one-third of
the world’s lithium supply chains, and diversifying that market will
not be easy. Furthermore, lithium’s essential role in a huge number
of clean energy infrastructural components has led to rising prices and a
scarcity mindset. Avoiding this sticky situation altogether is a major win for
SABERS.
More
NASA's Solid-State Battery Breakthrough Could
Transform Air Travel | OilPrice.com
This weekend’s music
diversion. A long forgotten Bohemian composer whose work
was occasionally misattributed to Vivaldi. Approx. 12 minutes.
František
Jiránek (1698-1778) - Concerto a 5
František Jiránek (1698-1778) - Concerto a 5 - YouTube
This weekend’s chess update. Approx. 6
minutes.
WARNING!
People Have gone Mad Trying to Solve This || White to mate in 2!
WARNING! People Have gone Mad Trying to Solve This ||
White to mate in 2! - YouTube
This weekend’s interesting maths
update. Approx. 9 minutes.
A
weird method for factoring quadratics (and why it works)
A weird method for factoring quadratics (and why it
works) - YouTube
“As government expands, liberty contracts.”
Ronald Reagan.
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